Should I Avoid NICE Ltd (NICE)?

In this article we will check out the progression of hedge fund sentiment towards NICE Ltd (NASDAQ:NICE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is NICE Ltd (NASDAQ:NICE) a buy right now? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets retreated by 11 in recent months. NICE Ltd (NASDAQ:NICE) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 33. Our calculations also showed that NICE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

According to most shareholders, hedge funds are assumed to be underperforming, old investment vehicles of years past. While there are more than 8000 funds trading at present, Our researchers look at the aristocrats of this club, approximately 850 funds. These hedge fund managers handle most of the smart money’s total capital, and by paying attention to their inimitable equity investments, Insider Monkey has determined several investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Robert G. Moses of RGM Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a gander at the latest hedge fund action regarding NICE Ltd (NASDAQ:NICE).

Do Hedge Funds Think NICE Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in NICE over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Rivulet Capital was the largest shareholder of NICE Ltd (NASDAQ:NICE), with a stake worth $216.6 million reported as of the end of June. Trailing Rivulet Capital was RGM Capital, which amassed a stake valued at $216.1 million. Eminence Capital, Point72 Asset Management, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Blackcrane Capital allocated the biggest weight to NICE Ltd (NASDAQ:NICE), around 12.5% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, earmarking 12.27 percent of its 13F equity portfolio to NICE.

Since NICE Ltd (NASDAQ:NICE) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that slashed their positions entirely last quarter. It’s worth mentioning that Robert Smith’s Vista Equity Partners dropped the biggest investment of the 750 funds monitored by Insider Monkey, worth about $28.2 million in stock, and Eric Bannasch’s Cadian Capital was right behind this move, as the fund said goodbye to about $27.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 11 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to NICE Ltd (NASDAQ:NICE). These stocks are Westinghouse Air Brake Technologies Corporation (NYSE:WAB), Textron Inc. (NYSE:TXT), Discovery Inc. (NASDAQ:DISCA), Enel Americas S.A. (NYSE:ENIA), argenx SE (NASDAQ:ARGX), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Liberty Global plc (NASDAQ:LBTYA). All of these stocks’ market caps are similar to NICE’s market cap.

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As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $1144 million. That figure was $1035 million in NICE’s case. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 7 bullish hedge fund positions. NICE Ltd (NASDAQ:NICE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NICE is 33.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on NICE as the stock returned 13.8% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.